Housing Market Tracker - Homebuilder Mortgages and Steep Price Cuts

Quote of the Day

“A few years ago, everyone was very happy and smiley. Last year it was a touch off. This year it’s a little more serious. It’s perceptible.” – Homebuilder Douglas Jones of Keystone Builders in Richmond, about the atmosphere at the International Builders Show in Florida this year. (Winston-Salem Journal Now, Feb. 16th)

Homebuilders, Housing Stocks and Housing-Related Stocks

In Port St. Lucie, Scrappers Stay In Game. "Port St. Lucie, Florida: "Mercedes Homes (MDC) [is] slashing prices on its inventory of unsold homes... The Treasure Coast Builders Association estimates... 60%-70& of the builders working in Port St. Lucie during the housing boom have gone. The construction industry — once the city's bread and butter — is not flush enough now to sustain restaurants, car dealerships and other service businesses... KB Homes (KBH) [left] the Treasure Coast last year... Lennar (LEN) and Centex (CTX), have scaled back projects... Leaders [have] started recruiting new businesses, focusing on the biotechnology industry... City Manager Don Cooper: The projects'... effect on the city's economy will take time." (Palm Beach Post, Feb. 18th)

Builders Offer Buyers Price Guarantees. California: "Homebuilders are offering a plan designed to take the worry out of buying when prices are falling. At least three companies in the region [Ryland Homes (RYL), KB Homes and Capital Pacific Homes] are offering price guarantees. One plan promises to lower the amount a buyer pays for a new home if prices drop after they buy, but before they get their keys. Another lets buyers back out of deals and get their deposits back if their home is appraised for less than they paid... KB Homes will begin offering one at an O.C. project later this month." (OC Register, Feb. 17th)

Toho Preserve: Public Park Or Private Homes? "A group of residents calling themselves Citizens For Osceola Central Park will meet Thursday... to discuss the impact of a 1,600-acre development known as Toho Preserve. The group sees developer D.R. Horton's (DHI) desire to sell as an opportunity to turn the land between Kissimmee and St. Cloud into a nature park. There are a lot of people against this project that would bring more than 3,000 homes and apartments to the area. The county passed on an opportunity to buy the property from the Partin family for $25 million in 2003." (Orlando Sentinel, Feb. 17th)

Sunday Real Estate Round-Up. NY City: "Robert Toll, the CEO of Toll Brothers Inc. (TOL), the largest luxury home builder in the U.S. reportedly had his compensation cut from $19.2 million in 2006 to $8.4M for the last fiscal year, as his company's net income fell 95%. Toll was planning to move into the three-unit penthouse at One Ten 3RD, Toll's rectangle-paneled new condo on Third Avenue, but his wife vetoed that idea. Instead, the Robert & Jane Toll 2002 Children's Trust, "for benefit of" their 27-year-old son, Jacob, paid $2,235,672 for just one of those three penthouse units." (Luxist, Feb. 17th)

Window Of Opportunity. "Siltech makes acrylic solid surface windowsills... Numerous builders and developers use its products and installation services, including WCI Communities (WCI), Centex Homes and Pulte Homes (PHM)...Siltech president Dino Longo: Our growth averaged about 150% plus per annum until 2005. For 2006 and 2007, our growth hasn’t increased that much and our sales volume is down probably as much as 50%. During Siltech’s busiest year, it was producing 200,000 linear feet a month in its factory. Currently, production is at about 20,000-30,000 linear feet a month." (Naples News, Feb. 17th)

Filling Demand For Home Data. "Charlotte-area firms MetroStudy and Market Opportunity Research Enterprises... compile the local specifics of home building... Their data troves help guide multimillion-dollar decisions about when and where to build houses, stores and more. That information is especially valuable in today's struggling market, as everyone from bankers to builders and brickmakers seeks winning projects... Metrostudy's Charlotte manager, Bill Miley: "If you build it, they will come -- that's been the mentality in Charlotte for three years. That's totally shifted. The risk side is higher so the information they use to make their decisions is even more important." (Charlotte Observer, Feb. 16th)

Builders Do Lots Of Research. "Chris Apostolopoulos, president of KB Homes Northern California division: KB Home allows buyers to tailor their houses by offering more than 5,000 options... On the other hand, Lennar Co. touted "Everything's Included" for its models at the former Mare Island Naval Shipyard in Vallejo. All features, except flooring, were standard." (San Francisco Chronicle, Feb. 17th)

Builder Announces Price Rollbacks. Florida: "Ryland Homes announced major price reductions in five Fort Myers-area communities. Prices range from a low of $179,900 for Castillo Series single-family homes... at The Forum... and single-family homes... in Cape Coral... Pallazo Collection 4-5BR homes at The Forum, which range from 2,320-3,572-sf, are priced from $309,490-$381,490... Ryland has reduced prices to a low of $228,490-$306,490 at Hampton Lakes at River Hall, where single-family homes range from 1,960-2,923-sf. At Remington Oaks, 4-5BR homes ranging from 2,421-3,705-sf, are priced from $299,990-$418,990. New single-family homes at Banyan Bay in Fort Myers are priced ranging from $229,490-$325,490." (Naples News, Feb. 17th)

Home Builders Get Together For A Cry. "[This year's] International Builders Show, with 1,900 exhibitors and nearly 100,000 attendees, is more angst-ridden as builders look for ways to stay afloat until there’s a turnaround. Attendance is expected to be down about 5%... Tim Hensley of the Hensley Custom Building Group of Cincinnati [which] builds homes for up to $3 million, has taken steps to survive by cutting overhead, reducing prices on unsold homes and sticking to building homes under contract. Things have been looking up lately, he said... Clark Wilson, CEO of Green Builders of Austin, Texas... also said he is doing just fine." (Winston-Salem Journal Now, Feb. 16th)

County Calls For Deal In Row Over Road Extension. North Carolina: "When the Durham County Commissioners approved the plan for Summer Meadow subdivision in northern Durham County in 2000, the adjacent working-class neighborhood of Hillview Terrace went along after the developer promised to build a connector to provide a second exit out of their neighborhood through Summer Meadow. Now Beazer Homes (BZH), Summer Meadow's developer and a financially besieged homebuilder, wants the Felicia Street connector killed on grounds that it will cause flooding to one house in Hillview Terrace. Hillview Terrace residents say it's all about money. Beazer says it's about sound engineering." (Durham News, Feb. 16th)

Tourists Arrive At Right Time. "Florida: Dan Lubner, VP for marketing for the Fort Myers-based Robb & Stucky furniture and interior design firm: In the past month, some Robb & Stucky-furnished builder models in WCI communities have sold. And, while Robb & Stucky sales overall were flat in Q4'07, "Bonita actually saw a 20% uptick," Lubner said, adding: "I honestly believe things aren't as bad as we read every day." (News Press, Feb. 16th)

Deep Home Discounts Dream For Some, Worry For Others. "Deeply discounted new homes go on sale Saturday in two northeast Bakersfield communities, an event that has inspired stakeout tactics in some would-be homeowners and a measure of concern among those who paid full price to live in the neighborhoods. D.R. Horton is selling homes at up to a 50% discount in 23 Southern California developments starting this weekend... One home plan, formerly listed for $380,000, has been reduced 48% to $199,990... Iindustry observers... say the sale is a drastic measure, and a sign of the impact large national builders have had on the local homebuilding market." (Trading Markets, Feb. 16th)

55+ Market Now 21 Percent of New Home Buyers. "National Association of Homebuilders' Paul Emrath found that 55+ households make up 20.9% of all new home buyers and 24.3% of new custom home buyers... Emrath said... that many of these buyers have accumulated wealth over the years and can pay for new homes by selling their existing homes... The vast majority of people age 55 and above tend to be happy with their current homes... Mark Stemen, SVP of active adult for K. Hovnanian's (HOV) Landover Group: "People are not moving that far away from where they lived and worked and raised their families." (Builder Online, Feb. 15th)

National Builders Say Home Market's Not That Bad In Raleigh-Durham. "North Carolina: Despite Toll Brothers CEO Robert Toll's woeful appraisal of the national housing market recently... Toll's Raleigh region is moving forward with the grand openings of six new neighborhoods over the next four weeks. The story is similar for Centex Homes, Lennar Co., Pulte Homes and several of the other publicly traded, national home-builder groups that build more than 30% of the new homes in the Triangle each year." (Triangle Business Journal, Feb. 15th)

Mansfield Eyes $5M Bond For New Sewerage Plant. Ohio: "The Township Committee plans to take out a $5 million bond to pay for the construction of a wastewater plant... The construction will be paid for in part... by Centex Homes... In a 2005 deal, the township allowed Centex to build 310 single-family homes, 60 townhouses for the physically handicapped and 36 units for low- and moderate-income families along Petticoat Bridge Road... restricted to those 55 and older... In return, the developer will give the township a 200-acre property, known as the Reed farm, as well as $4.58 million to help pay for the wastewater plant." (Burlington County Times, Feb. 15th)

Toll Brothers Unveil Gowanus Canal Project. NY: "Toll Brothers Inc. unveiled the long-awaited plans for its unnamed Gowanus Canal project, a 600,000-square-foot residential and commercial development along the notoriously polluted Brooklyn waterway... which includes 600 housing units, an underground parking garage, commercial space and an esplanade on the water’s edge... The project includes 130 housing units for low- to middle-income tenants and another 577 market-rate units... The development also includes 2,000-sf of retail space, 2,000-sf of community space and a 23,000-sf esplanade." (Crain's NY Business, Feb. 15th)

S&P Cuts Home Builders' Debt On Housing Weakness. "Standard & Poor's on Friday cut its ratings on a slew of home builders, saying the weak housing markets will pressure profits and the companies will have to further amend terms of debt facilities with banks. S&P cut K. Hovnanian Enterprises Inc, Standard Pacific Corp (SPF) and Beazer Homes USA Inc deeper into junk territory. Beazer remains on review for further downgrade. The rating agency also cut Centex Corp to junk. The outlook on Hovnanian, Standard Pacific and Centex is negative, indicating additional ratings cuts may be likely over the next two years." (Reuters, Feb. 15th)

Builder Holds Pricing By Offering Lower Mortgage Interest Rates. "This coming President's Day weekend, several public home builders are hoping to move spec inventory and capture revenue before the end of Q1'08... In Northern California, Central Valley, Sacramento and Reno, Centex Homes is promoting Centextravaganza. Prices at all 15 D.R. Horton communities in Northern California and Nevada will be dramatically reduced from 2007 prices. And in the Southern region of the state, through its "un-auction" sale, Horton is already touting savings up to 50% off seasoned spec inventory... Epcon Communities is spurring sales with... a 4.75% mortgage for both the buyer and the buyer's buyer and a lease-to-own option." (Big Builder Online, Feb. 14th)

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